Misleading claims and unfounded concerns about UBI
In January 2020, Hull City Council unanimously passed a motion calling for Hull to be the first place in the UK to pilot a UBI and have followed up by writing to the Chancellor to ask for support. This has sparked significant amounts of national press and has raised a number of ‘claims’ about Basic Income that need rebuking.
Various reports – from think-tanks like Compass, the Royal Society of Arts and the New Economics Foundation – have shown that a UBI could significantly reduce poverty, increase economic security and be an income boost to the majority of British citizens.
We hope the government will listen to Hull City Council and the evidence behind the potential of a UBI to reduce poverty and tackle economic insecurity for many millions in this country, particularly for those who are working hard on low incomes.
However, the government has previously made some false claims regarding UBI and we want to highlight some of these, as many are highly misleading and based on flimsy evidence.
The following sets the record straight on some common questions and other claims made about UBI.
~ Jonny Ross-Tatam (UBI Lab Leeds) and Sam Gregory (Chair of UBI Lab Sheffield).
Responses to some of the misleading claims that the government have previously made
A key thing remember: A Universal Basic Income works in a very similar way to the child benefit and the basic state pension. The only real difference with a child benefit is that a UBI is paid to every individual, rather than every household.
Government claim: ‘It is unaffordable and could require substantial tax rises.’
The government’s claim is UNTRUE.
A Universal Basic Income is affordable. There are a number of reports done by economists and think-tanks like Compass, the Royal Society of Arts and the New Economics Foundation (see references), which shows how a UBI can be funded fairly and sensibly. All of these proposals for a UBI would reduce poverty and see an increase in incomes for the vast majority of working people.
A number of progressive and sensible funding options have been put forward by experts. These include progressive taxation, where the higher your earnings the more of your UBI you pay back in tax; closing some of the tax loopholes (there are estimated to be over 1,000) that disproportionately benefit the wealthiest in society; a tax on high levels of pollution, with the revenue being paid out to British citizens through a UBI; or by creating a sovereign wealth fund and paying out the dividends to British citizens as a UBI, which is how Alaska have funded their (modest) UBI since 1982.
In short, a UBI is affordable and all serious UBI proposals will reduce poverty and see an income boost for the majority of British citizens.
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Government claim: ‘It will be a kick in the teeth to hard-working people.’
The Government’s claim is UNTRUE.
This isn’t the case. A UBI would increase the income and financial security of the vast majority of working people. All serious UBI proposals (see references) demonstrate this. It’s one way of ensuring that working people get a share of the growing prosperity in this country. Universal services, like the NHS, and universal payments, like Child Benefit or the state pension, make the majority of the British people better off and more financially secure. A UBI would work in the same way.
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Government claim: ‘Cutting taxes is a better way.’
The government’s claim is QUESTIONABLE.
A UBI is a better way of increasing security and income for the majority of people, and is a better way of reducing poverty than tax cuts. Tax cuts tend to help those who are already the richest in society and don’t tend to do much to help boost incomes and security for those on low incomes.
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Government claim: ‘It would fail to tackle poverty.’
The Government’s claim is COMPLETELY UNTRUE.
This is the most misleading, and categorically untrue, of any of the government’s claims.
A number of reports have shown that a UBI would significantly decrease poverty. The think-tank Compass have designed a UBI scheme that would decrease child poverty by a third, working-age poverty by a fifth and pensioner poverty by a third. A UBI model developed by the Royal Society of Arts (RSA) for the Scottish Government would reduce destitution in Scotland by over a half, while the New Economics Foundation (NEF) ‘cost- neutral’ proposal for a UBI (‘National Weekly Allowance’) would lift 200,000 families out of poverty (see reports in references below). The government has based their claims on a much criticised 2018 JRF report, which bases its own claims on ‘straw men’ - i.e. versions of UBI that would never be adopted. Recent reports have shown clearly how a UBI can reduce poverty and provide an income boost to the majority of British citizens.
The JRF report even concedes that some versions of UBI could significantly decrease poverty (44% decrease for child poverty, 15% for working age poverty and 5% for pensioner poverty). These are significant falls in poverty, far beyond the impact of Universal Credit. Strangely, the JRF dismissed these poverty-busting UBI schemes as not ‘really a UBI’, as they involved topping-up existing benefit payments. The JRF are wrong about this. A UBI which tops-up existing benefits is still a UBI. A well-designed UBI would be a very effective way of reducing poverty and boosting the incomes of the majority of British citizens.
The JRF report essentially highlights that some forms of UBI could significantly reduce poverty. UBI schemes that reduce poverty and increase economic security will be explored in the Hull pilot.
The Centre for Social Justice – founded by Iain Duncan-Smith MP – ignores evidence that a UBI could significantly reduce poverty and boost incomes for the majority of British citizens. This is perhaps unsurprising, given their links to Iain Duncan-Smith and the current Conservative government.
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Government claim: ‘A UBI doesn’t take into account people’s additional needs with disability or housing.’
The Government’s claim is MISLEADING.
Again, this is misleading. All serious UBI proposals retain housing benefit and disability benefit. Some proposals, from Compass and the NEF, are top-ups on existing means-tested benefits – just like the Child Benefit. In these reports, people on low incomes and those with disabilities are significantly better off under a UBI.
We would only support versions of a UBI that will make the majority of people better off, particularly those currently in receipt of Universal Credit or disability benefit. We would want a system of either enough UBI so that people don’t have to rely on benefits, or simply a top-up on the benefits they already have.
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Government claim: ‘A UBI would be less generous.’
The government’s claim is FALSE.
All serious UBI proposals would reduce poverty and see an increase in incomes for the majority of people, particularly those on the lowest incomes.
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Government claim: ‘A UBI does not have significant cross-party support.’
The government’s claim is QUESTIONABLE.
Support for a UBI is growing across all parties. In Hull, it has gained cross-party support from councillors of all parties, including Labour, the Liberal Democrats, the Green Party and even some Conservative councillors. UBI trials are supported by current Lib Dem leader Ed Davey, the Green Party and the most recent Labour manifesto. The SNP have supported a feasibility study into possible UBI trials, while Plaid Cymru have also expressed interest. Conservative councillors in Fife, Scotland, have supported UBI trials.
People from all parties are waking up to the fact that we need to take bold action to tackle poverty and economic insecurity for millions across this country. And UBI could be a way for the majority of British people to get a bigger share of the national income that they contribute towards.
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Government claim: ‘It didn’t work in Finland.’
The government’s claim is UNTRUE.
The trial in Finland was a success. Participants did not work less, while they reported improved financial security, health and wellbeing. It was paused in the lead-up to the Finnish general election of 2019 because they didn’t want politics to interfere with the scientific trial. The second round of results will be released later in 2020 and there are proposals for another pilot in Finland.
The evidence from the trial demonstrated the positive impact of a UBI. You can see the official report here.
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Government claim: ‘A UBI disincentivises work.’
The government’s claim is UNTRUE.
Again, this claim is untrue and not based on any evidence from any time a UBI has been trialled. Firstly, a UBI helps to reward and incentivise work, as it is not withdrawn as income increases – just like Child Benefit.
At the most, Basic Income has only ever had small effects on work when it has been tried. In Canada (Mincome scheme, 1970s) the reduction in work was often used for caring or education, and in the US (NIT experiments, 1970s-80s) people used the extra income to spend longer finding the right job. People didn’t work less when it was tried in Finland, or Canada recently – in fact there was an increase in local economic activity when it was tried in villages in Namibia and India."
Also, outside of pilots, recent research into the Alaska dividend found that there was a small increase in PT work at the expense of FT work.
People will still work with a UBI, but poverty will be reduced and most working people will be more financially secure. A UBI will also support people as they transition between work, work on a small business idea, gain education and skills, and care for loved ones.
Additional questions
Will it replace Universal Credit?
No. UBI proposal would replace all means-tested benefits / Universal Credit. A separate means-tested housing benefit and disability benefit will be retained under any UBI scheme. If the UBI is a lower amount, then it will simply top-up existing means-tested benefits, just like Child Benefit.
As Councillor Jack Haines has said in an article for the Hull Daily Mail (Mon 27th Jan):
“We will never support anything that makes working people worse off and evidence suggests that a UBI would mean working people are financially much better off and that’s why we want to look at this.
Myself and my peers would want a system of UBI that is either enough so people don’t have to rely on some means-tested benefits or simply a top-up on the benefits they already have.” ~ Councillor Jack Haines
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Will it cause inflation?
There is no evidence of this happening in any UBI trial.
A UBI won’t be inflationary at the payment levels being discussed. Most mainstream proposals suggest it will be funded by redistribution from the wealthiest to the majority in society – not by printing money – so a UBI is not inflationary.
Boosting the incomes of the majority of people through a UBI won’t cause inflation, but will be good for local economies. When people on modest incomes have more money, they’ll invest it locally. As local economies and businesses grow from people spending more locally, that will be good for living standards, quality of life and the economy for the whole country.
A UBI will boost incomes and support local economies across this country. As local economies grow and businesses grow, and they deliver services and sell more goods, then that controls inflationary pressures.
Economic growth and productivity keep inflation down. A UBI could help with this. It could boost local economies and UBI trials elsewhere (in Finland and Canada for example) have shown that the extra financial security supports healthier communities by reducing mental and physical illnesses – this would be a boost for local communities and their economies across this country.
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‘Why should premier league footballers receive it?’
It is a payment that everyone receives, just like the state pension. As with the state pension or Child Benefit, the highest earners will pay more in tax to receive it. So ‘Premier League footballers’ wouldn’t be better off, but they’d pay more in tax towards a UBI that would increase incomes and financial security for the majority of their fellow citizens.
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Will it help with automation?
Automation is increasing insecurity for many, particularly those losing manufacturing jobs as a result. A UBI is not a replacement for work, but will cushion that transition between jobs, support people while retraining, and will put more money into communities that have lost out from automation.
A UBI is not the only solution – we need to be promoting good quality work too, but a basic income will help increase financial security for millions, give an economic boost to communities across our country, and tackle the worst aspects of poverty in our society. We also need to ensure that the majority of people receive a fairer share of the wealth that they are helping to create in this country and a fairer share of the wealth that will be created from automation. A UBI is one way of doing that.
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Claim: ‘There’s no such thing as free money’
I wouldn’t describe it as ‘free money’. A basic income is about the majority of British citizens getting a fairer share of the wealth they help to create. It is one way of ensuring the majority of working people, not just the wealthy, get a boost from the wealth created in this country and particularly the wealth being created from robotics and automation.
We already have similar schemes to a UBI in this country, where people get a weekly income boost and are not told how to spend it. They are called Child benefit and the basic state pension. These are proven ways of increasing incomes for the majority and reducing poverty.
A UBI is like the Child Benefit and the state pension, but for all adults.
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‘Is UBI a benefit?’
It is a universal payment to every British citizen that will increase incomes and financial security for the majority of British people. It works in the same way as Child Benefit or the state pension. It is a way of ensuring that the majority of people get a share of the growing prosperity they work hard to create. And it helps to ensure that no-one has to go to food banks to eat or becomes homeless because of sanctions or delays with Universal Credit.
It is an entitlement that all British citizens can access, like the state pension. In most UBI proposals, the highest earners will essentially pay back their UBI in tax.
If the UBI was high enough it could replace some means-tested benefits (though disability and housing benefit would always be retained), and thus simplify some of the bureaucracy and complexities of means-tested benefits. Or a UBI would be a top-up on existing benefits. These options will be explored before any UBI pilot takes place.
The key point to remember is that all UBI proposals are designed so that the majority of people have an increase in incomes, and those currently on low incomes (or Universal Credit) will particularly gain.
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‘Won’t employers just lower wages?’
There is no evidence to suggest this would happen and that’s not really how wages are negotiated. Employers tend to pay what they are able to negotiate with employees - they don’t base their wages on whether people have enough to live on. If they did, then we wouldn’t have the crisis of working people living in poverty and using food banks.
A UBI will help to increase the bargaining power of working people, as they would always have their UBI to support them if they left a bad employer and looked for another job, gained skills or training, or worked on a small business idea. Financial security can be empowering and a UBI would help to achieve that.
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References
New Economics Foundation, ‘National Weekly Allowance’ https://neweconomics.org/2019/03/nothing-personal
Compass, from desirability to feasibility - Basic Income for All: From Desirability to Feasibility
Royal Society of Arts, A Basic Income for Scotland - https://www.thersa.org/globalassets/pdfs/rsa-a-basic-income-for-scotland.pdf
Kela and the Ministry of Social Affairs and Health (Finland), press release 8 February 2019; Preliminary results of the basic income experiment: self-perceived wellbeing improved, during the first year no effects on employment - News archive for customers
More about the author
Jonny Ross-Tatam - @JRossTatam
Passionate about #basicincome & drug policy reform. Founder @BuchananInst. Ambassador @LabourDrugRef & @TeachFirst & #BasicIncomeNorth.